Premier Oil sells Wytch Farm field

Premier has announced that it has entered into a sale and purchase agreement to sell its entire interests in Licences PL089 and P534, which contain Wytch Farm field, to Verus Petroleum SNS Limited for a cash consideration of US$200 million (subject to certain customary financial adjustments) payable on completion (the Disposal).


In addition, Premier will be able to release Letters of Credit totalling approximately US$75 million, which have been issued in relation to future decommissioning liabilities which are now being transferred to Verus. The effective date of the Disposal is the 1st July 2017.


Wytch Farm is an onshore oil field located in the nmglish county of Dorset which has been producing since 1979. Verus is a UK-focused independent E&P company backed by HitecVision, a Norway based private equity investor focused on the upstream offshore oil and gas industry.


Background, reasons for Disposal

Premier has a track record of realising value at the appropriate stage of an asset’s life-cycle through active portfolio management. The Board believes that the Disposal now is in the best long-term interest of Premier and its stakeholders. It represents an excellent opportunity to realise an attractive valuation well in excess of the implied valuation from the most recent transaction in Wytch Farm.


The Disposal will generate proceeds to accelerate deleveraging of the balance sheet. Wytch Farm is non-operated, onshore and with fewer near-term growth prospects than elsewhere in Premier’s portfolio.


Information regarding Wytch Farm

Wytch Farm is a large onshore oil field although a significant area extends offshore. The field has been developed with 11 well sites linked to a central onshore gathering station and is operated by Perenco UK Limited. Production is exported via pipeline to the Hamble terminal near Southampton for tanker loading.


Premier acquired a 12.4% interest in Wytch Farm field in 1984. In December 2011, Premier completed the acquisition of an additional 17.7% interest from Perenco UK Limited and in July 2017 announced an agreement to acquire a further 3.7% from Maersk Oil North Sea UK Ltd, taking its total interest to 33.8%.


As of the 31st December 2016, the estimated 2P reserves in Wytch Farm net to Premier were 14.9 MMboe. Wytch Farm production, net to Premier’s working interest, averaged 5.1 boepd for the first half of 2017.


For the 12 months ended the 31st December 2016, Wytch Farm generated profit before taxation of approximately US$23.4 million and as at the 30th June 2017 had gross assets of approximately US$90.2 million.